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Today we’re going to take a look at the well-established Adobe Systems Incorporated (NASDAQ:ADBE). The company’s stock saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Adobe Systems’s outlook and valuation to see if the opportunity still exists. See our latest analysis for Adobe Systems

Is Adobe Systems still cheap?

The stock is currently trading at US$241.88 on the share market, which means it is overvalued by 35% compared to my intrinsic value of $178.92. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Adobe Systems’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Adobe Systems?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 94.74% over the next couple of years, the future seems bright for Adobe Systems. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in ADBE’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ADBE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ADBE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ADBE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.